The Effects of Globalization/China Shock on US Wages

A pretty interesting graph that I saw today from a Harvard Professor (hopefully, a Harvard Professor/Economist is viewed as a reasonable source). China joined the WTO in 2001, so it is a pretty good comparison of the economy before the "shock" of China trading and after it occurred. This is wage increases based upon the "percentage" in which the poorest people are under P10 and the richest are over P90.



A few things to notice:
1. The main effect: wages have been rising faster in the past 25 years than in the previous 25 years, across all income levels. Substantially faster, in fact.
2. In fact, this effect is strongest in low income groups. The poorest people actually lost real wages over the prior 25 years but have gained the most over the past 25 years. It is interesting given the language utilized by populists about people being left behind. Can't see any evidence of this in this data.
3. While the wages of true middle classes are growing much faster than they did in the late 20th century, they are not growing as fast as either the group at the top (which is consistent with the prior 25 years) nor the group at the bottom (this is new). This seems to be the source of the "economic anxiety."

Here are my thoughts on this: the middle classes have grown to expect government intervention of the economy. The Democratic Party-leaning middle looks upward and wants the relative growth seen by the high income folks. The Republican Party-leaning middle looks downward and fears the relative growth of those at the bottom.

I suspect this is why you are seeing polarization by income at a geographic level. Middle income people living in relatively rich areas likely focus more on relative income gains compared to the richer folks (i.e., "falling behind" the rich). Middle income people living in relatively poor areas likely focus more on their fear of being "caught" by poorer people, whose income is growing by more.